The Kazakhstan Government’s message to foreign investors: We’re open for business… …and ready to provide a favourable and enabling platform for investment in Kazakhstan and the broader CIS region

by Reed Smith
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The Kazakhstan government recently announced a roadmap of specific and immediate measures designed to incentivise foreign direct investment and further privatise key sectors of its economy. The roadmap broadly outlines a series of measures to be implemented by the government in 2014.

Proposed incentives for qualified investment projects:

  • Stabilization of tax rates, tariffs and environmental obligations
  • Exemption from corporate income tax
  • Rebate of up to 30% of investment costs upon completion of investment project
  • Guaranteed off-take by state-owned companies of goods and services produced by the investment project
  • Improved dispute settlement mechanisms and access to international commercial arbitration

Proposed investment reforms and undertakings:

  • State authorities and state-owned companies to participate in direct negotiations in relation to implementation of “anchor” investment projects
  • Single-window system for obtaining various state authorisations and the investment ombudsman
  • Maximum term for lease of agricultural land by foreign investors to be extended and subsidies to agricultural companies
  • Improvement of VAT administration and procedures for VAT return
  • Natural monopoly reforms including a new tariff policy
  • Reforms related to concession projects
  • Financing and improvement of bank distressed asset buy-out procedures by a specialised state-owned fund

The roadmap also mandates the continuation of the “People’s IPO” programme of national companies and a new wave of privatisation of state-owned companies beginning in June 2014. The Kazakhstan government has approved the privatisation of 106 companies affiliated with the Kazakhstan Sovereign Wealth Fund “Samruk-Kazyna” JSC between 2014 and 2018. Major players in the Kazakhstan market to be privatised by auction in 2014 include:

Company

 

% of equity to be privatised

Kazmortransflot LLP, the national maritime shipping company

 

49%

Euro-Asia Air JSC, a subsidiary of KazMunaiGas, owns and operates helicopters and airplanes

 

100%

Maikainzoloto JSC, a gold mining and production company

 

25%

Kazakh Oil and Gas Institute JSC, a subsidiary of KazMunaiGas JSC, providing design, engineering and research services in the oil and gas industry

 

100%

Subsidiaries of Kazakhstan Temir Zholy JSC, the national railway company, which carry out various works and services in the railroad industry

 

up to 100%

Subsidiaries of Samruk-Energy JSC, which produce, supply and distribute electricity

 

up to 100%

Subsidiaries of Kazakhstan Engineering JSC, which manufacture various types machinery and equipment

 

up to 100%

Others

 

up to 100%

Kazakhstan: key facts

  • Ninth largest country in the world
  • Sixth largest country around the world in terms of mineral resources
  • Mineral and resources base consists of 5,004 fields: estimated cost is around USD46 trillion
  • Customs union with Russia and Belarus provides access to Russian and Belarusian markets
  • Three of four BRIC countries are situated next to Kazakhstan: Russia, China, and India
  • Russia and China are the largest trading partners
  • Trade relations with Germany, Turkey, Switzerland, the Czech Republic, Italy, the U.S., Great Britain, South Korea, and others

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Reed Smith | Attorney Advertising

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